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Rx Depot's Carl Moore: Hero Or Outlaw?

November 16, 2003

Driving down a Chicago street with a cell phone in one hand, a list of Rx Depot Inc. stores he wants to visit in the other, and one knee on the steering wheel, Carl Moore is full of righteous indignation. He rails against the Justice Dept. and the Food & Drug Administration, which, in an unprecedented case won an injunction on Nov. 6 to shut down the chain of 87 mail-order shops he set up to help Americans get cheaper prescription drugs from Canada. And he has a few choice words for the big pharmaceutical companies, which he accuses of gouging U.S. consumers.

Moore, a 59-year-old Oklahoma oilman who made and lost a fortune in the early 1980s and has since tried his hand at several other businesses, finds himself in an unlikely place: at the center of one of the nation's most troublesome economic and social issues -- the high price of prescription drugs. And he is delighted to be there.

When he launched Rx Depot a year ago, Moore figured he could take advantage of the legal gray area surrounding drug importation. The FDA grudgingly allows individuals to bring in 90 days' worth of medication for their own use, and it is estimated that next year Americans will spend $1 billion doing so. The law does not permit companies other than the original manufacturer to import drugs. But Moore says he set up his franchise business only to facilitate consumers' own purchases; Rx Depot does not buy or sell any medications. That's why he never expected such swift retaliation from the government.

CROSSFIRE

Apparently, the government also was not quite ready for Moore's fierce resistance. When an Rx Depot store owner in Indianapolis worried he would be jailed if he defied a cease-and-desist order, Moore bought back the business and flew his mother in to run it. After the FDA ordered him to close his Lowell (Ark.) store, one of the 22 he owns outright, he expanded it, and sales continue to grow. In the midst of this, Moore says he has received more than 1,200 inquiries from hopeful Rx Depot franchisees. He also likes to recount how some 100 senior citizens lined up outside his Tucson store the day after it was told to shut down. "This is what revolution is made of," Moore says with relish. The government will have to haul him away in handcuffs to put an end to Rx Depot altogether, he says. Which might be just fine with some officials.

A U.S. District Court in Oklahoma agreed with the Justice Dept. request to close down Rx Depot nationwide. Moore complied immediately, he says. The court also gave Moore 10 days to notify his customers that he's violating the law. But in a defiant message on Rx Depot's Web site, Moore urges senior citizens to contact their congressmen and voice their outrage. Indeed, in the increasingly emotional tug-of-war over access to cheap prescriptions, the Justice Dept., the FDA, drugmakers, and several state pharmacy boards argue that Rx Depot -- and smaller competitors such as Discount Drugs of Canada and Canadian Drug Service Inc. -- are abetting the importation of potentially unsafe prescription drugs and violating federal law.

Is Moore a threat to public health in America? "His business is," says William Hubbard, senior associate commissioner of the FDA. "When individuals seek to profit by importing these drugs, we've got a problem." And a spokesman for Eli Lilly & Co. (LLY

), which has been particularly aggressive in combating imports from Canada, says: "Their practice is illegal, and it's unsafe."

REVOLT OF THE STATES

Now that Moore has lost his case, he vows to seek a jury trial. He plans to file an appeal in the 10th Circuit Court in Denver on Nov. 7. "I'll never stop until I get to the Supreme Court," he says in his Tulsa twang. If he wins, though, he will have cleared the way for new competitors. To fend off potential challengers, Moore plans to add as many as 200 stores. And he hopes that some established pharmacy chains might decide to work through Rx Depot. "I am not giving up," says Moore.

In the meantime, while promising to seek more injunctions against businesses such as Rx Depot, the feds are losing ground in the battle to keep out cheaper drugs. Prescription-drug costs are the fastest-growing segment of the health-care industry; in Canada, price controls mean medications can be nearly 75% less expensive than in the U.S. At least four governors -- in Illinois, Iowa, Michigan, and Minnesota -- are considering purchasing drugs from Canada for state employees, while the mayor of Springfield, Mass., is already doing so. "It's a movement of the same intensity in certain sectors of society as the antiwar and civil rights movements," says Mike Hatch, Minnesota's attorney general.

The biggest change could come from Congress itself. Legislators are considering two bills that would legalize the importation of Canadian prescription drugs for commercial use: one would allow only registered pharmacies and wholesalers to bring in medications; the other would permit any individual to do so. If either passes, Moore would probably be put out of business -- if the courts haven't done so after his appeal. It is a possibility about which he is remarkably sanguine: "The cause is the most important thing," he says.

Moore was drawn to the issue after he developed heart trouble in 1999 and had no health insurance to cover the cost of two medications and a stent. Then his ex-wife, Corey, whom he is still close to, developed breast cancer and found she could buy cheaper drugs from Canada. In 2001, Moore founded U.S. Assurance, which provided discount health benefits to small businesses and set up a Web site for customers to buy drugs from Canada. But Moore could not make a go of it, and the company folded last year.

That led to Rx Depot. Moore realized that senior citizens especially would appreciate the service of a middleman: The company copies and faxes prescription forms and medical histories to Canadian pharmacies, where doctors rewrite the prescriptions and mail the drugs directly to patients in America. The savings can be sizable: 30 pills of pain reliever Vioxx cost $43 when bought through Rx Depot; the same amount can run to $85 in the U.S. Rx Depot makes a 12% commission on each sale and expects revenue to exceed $36 million this year. Moore says most stores make a profit of about $22,000 a month. "Rx Depot is a life-saver," says Jerry Cox, 52, a heart transplant patient from Tulsa who saves $8,000 a year buying prescription drugs through the company. "Shutting them down will take food off my table."

Moore considers Rx Depot a penance of sorts, atonement for his extravagances as an oil baron. As he puts it: "There are more redeeming things about me than being a flamboyant smart aleck." At his peak, Moore was worth some $30 million. He owned two personal jets, kept camels on his Oklahoma farm, and flew to Europe with his son, Joe-Max (now a professional soccer player), to ski for weeks at a time. But when oil prices collapsed in the mid-1980s, so did Moore's business. He filed for bankruptcy in 1985. "We had six cars," says Corey. "I was left with a Jeep with no air-conditioning."

"OUT ON THE EDGE"

Over the next 15 years, Moore started and sold a business installing pay phones in rough Los Angeles neighborhoods and abandoned another selling water-purification systems in Puerto Rico. "Carl is the pinnacle of a wildcatter. He lives out on the edge with no guarantees," says David Peoples, an old friend and former real estate developer in Tulsa who helped start Rx Depot and now serves as chief operating officer.

As the government bears down on him and Congress considers laws that would threaten his business prospects, Moore does seem to be enjoying life on the brink. If he ends up going over, he knows what he'd like to do next: move to Winnipeg, open a pharmacy, and launch a prescription-drug mail-order business from there. Unfortunately for Moore, the Nov. 6 injunction also prevents him from doing so.

Editor's note: This story was updated online after BusinessWeek went to press on Nov. 5. By Brian Grow in Chicago